Shares of Michael Kors Holdings Ltd. KORS are trading up 7% in the pre-market session after the company reported better-than-expected first-quarter fiscal 2016 results. The luxury lifestyle retailer reported earnings per share of 87 cents and net sales of $947.3 million which topped the Zacks Consensus Estimate of 75 cents and $943 million, respectively.
On a year-over-year basis, earnings fell 4.4% but net sales grew 6.8%. Earnings per share for the quarter under review included 6 cents stemming from forex volatility.
Total revenues, including licensing revenues, came in at $986 million, up 7.3% year over year driven by strong demand for footwear and accessories.
Also, comparable-store sales decreased 9.5% (down 5% on constant currency) for the quarter as against a 24.2% increase in the prior-year.
Further, gross margin fell 100 basis points (bps) to 61.2% with forex headwinds alone contributing to a 60 bps decline. Operating margin shrunk 490 bps year over year to 25.2% owing to rise in operating expenses.
Segment Performance
The Retail segment generated net sales of $523.3 million which increased 9% year over year due to 107 new stores openings over the past year and higher e-commerce sales. Operating profit decreased 15.3% to $120.9 million. For the Wholesale segment, revenues increased 4.2% to $424 million, while operating profit fell 9.6% to $106.3 million.
Licensing segment revenues rose 20.5% to $38.7 million while operating profit grew 30.5% to $21.4 million.
Regional Performance
Revenues across North America grew 1.2% year over year to $727.3 million while in Europe, revenues increased 16.9% from the year-ago quarter to $216.8 million. Lastly, revenues in Japan grew 32.7% year over year to $19.6 million.
Other Financial Data
As of Jun 27, 2015, Michael Kors had cash and cash equivalents of $808.5 million and shareholders’ equity of nearly $2,089.2 million
At the end of the first quarter, Michael Kors operated 774 stores across the globe, inclusive of licensed locations. The company also repurchased nearly 7 million shares for $350 million in the quarter. The company has nearly $658.1 million worth of shares under the current repurchases authorization.
Guidance
Management continues to expect fiscal 2016 revenues to be around $4.7 billion to $4.8 billion compared with $4.2 billion reported in fiscal 2015. Further, comps (on constant currency) are projected to remain flat whereas on reported basis, comps are expected to decline in low-single digits. Earnings are expected to be in the range of $4.40–$4.50 per share. The company expects earnings to take a 21 cents hit from currency headwinds.
The Zacks Consensus Estimate is pegged at $4.23 per share, which could see upward revision in the coming days. Moreover, investments across the board will lead to a 140 bps to 180 bps increase in operating expense margins.
Further, management expects second-quarter fiscal 2016 revenues to be in the range of $1.06 billion to $1.08 billion. Comps (on constant currency) are projected to decline in low-single digits while on reported basis, comps are expected to decrease in high-single digits.
Earnings are expected to be in the range of 86–90 cents per share. The company expects earnings to take a 6 cents hit from currency headwinds. The Zacks Consensus Estimate is pegged at 95 cents per share. Moreover, investments across board will lead to a 440 bps to 490 bps increase in operating expense margins.
At present, Michael Kors carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked stocks in the apparel retail sector are Perry Ellis International Inc. PERY, Columbia Sportswear Co. COLM and Oxford Industries Inc. OXM. Columbia Sportswear is a Zacks Rank #1 (Strong Buy), while Perry Ellis and Oxford Industries carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment